On the Role of Debt Maturity in a Model with Sovereign Risk and Financial Frictions

Stéphane Auray and Aurélien Eyquem

No 1707, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We develop a model with financial frictions and sovereign default risk where the maturity of public debt is allowed to be larger than one period. When the debt portfolio has longer average maturities, public debt increases less in the event of a crisis, reducing the size of the subsequent fiscal consolidation through distorsionary taxes or public spending, with positive effects on welfare. In addition, we provide some results suggesting that optimized fiscal responses to a crisis depend on the average maturity of the debt portfolio.

Keywords: Sovereign Default Risk; Financial Crisis; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: E44 E62 H63 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: ON THE ROLE OF DEBT MATURITY IN A MODEL WITH SOVEREIGN RISK AND FINANCIAL FRICTIONS (2019)
Working Paper: On the Role of Debt Maturity in a Model with Sovereign Risk and Financial Frictions (2019)
Working Paper: On the Role of Debt Maturity in a Model with Sovereign Risk and Financial Frictions (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1707

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